Two former political officials -- Gov. George Allen and Paul Goldman -- have united to propose a tax reform measure that would make private investment capital more available for school improvements. In light of reports indicating that the environment in which students learn is instrumental for their success, Allen and Goldman have centered their focus on modernizing America's school buildings.

To update America’s aging public school buildings to provide students with modern facilities. The authors argue that modernized schools with updated facilities will improve educational quality and standards. They cite studies that demonstrate a connection between aging schools and educational underachievement.

The proposal would reform an IRS rule, offering a tax credit to investors who modernize a dilapidated school. Upon modernizing the school, the investors would lease the building back to local authorities. This will make the renovation of schools more affordable; eliminate infighting for the allocation of renovation money from the stimulus plan; create jobs; and, most importantly, improve student facilities.

 

Projects to rehabilitate buildings that are at least 50 years old may qualify for a 20 percent federal historic rehabilitation tax credit. However, the IRS ‘prior use rule,’ which applies to this tax credit, requires that the building be renovated for a use that is different to its previous use. Therefore, a private investor cannot invest in the renovation of an old school building that will remain in use as a school. The Smart Credit plan’s authors would amend the ‘prior use rule’ to give 'Smart Credit' for school rehabilitation.

The plan requires Congressional action in order to change the IRS ‘prior use rule.’ If the rule is changed, the plan’s success will be contingent upon private investors who are willing to invest in the modernization of schools and then lease them back to the school officials. The plan’s authors argue that the schools will benefit from access to private capital, and local taxpayers will benefit from private investment, obviating future need for public renovation funding.